S. 4 : Charge of income-tax-Compensation-Surrender of premises – Allocated flat as compensation to remove illegal occupant-The value of flat received by the assessee as compensation for removing nuisance shall constitute capital receipt -Not taxable. [S. 2(24),54F, 56(2)(vii)( b )]
The assessee was an illegal occupant of land, who was allotted a flat worth ₹2.59 crores as part of a court settlement after filing a suit against the developer. The AO treated this allotment as taxable income and denied the Section 54F deduction. The assessee argued that the compensation was for surrendering long-occupied premises and thus should be treated as a capital receipt. The ITAT held that the compensation for removing a nuisance is a capital receipt which is outside the scope of section 2(24) and thus the flat’s value was recognised as a non-taxable capital receipt. Relied on Shri Kishre D.P. v. ITO (ITA No. 3796/Mum/2014 dt.17-2-2017) (AY. 2018-19) (ITA No. 6153/Mum/2024, dt. 7-4-2025) (AY.2016 -17)
Mohammed Fakhre Alam Shaikh v. The Assessing Officer (Mum) (Trib) www.itatonline .org

(Coram : Hon’ble Shri B.R. Baskaran, AM and Hon’ble Shri Anikesh Banerjee, JM)